Demurrage, Detention & Dead Capital: The Cost Your P&L Doesn't Show You

There's a number on your profit and loss statement that doesn't exist as a line item. It doesn't appear under cost of goods sold. It doesn't show up in logistics. Your finance team doesn't track it because no single invoice captures it. But for most UK importers processing 50 or more containers per year, this number is somewhere between £30,000 and £150,000 annually.

It's the combined cost of demurrage charges, detention fees, and the working capital trapped between the moment you authorise a supplier payment and the moment your goods are physically in your warehouse and available to sell.

We call it dead capital. Money that is neither in your bank account earning a return nor converted into inventory generating revenue. It sits in transit — in banking systems, in port terminals, in freight forwarder yards — doing nothing except costing you money.

This article explains where it hides and how to measure it.

The payment-to-warehouse chain: where time becomes money

Most CFOs think of international procurement as a purchase: you order goods, pay the supplier, receive the goods. In practice, it's a chain of sequential dependencies where each step cannot begin until the previous one completes. Time lost at any stage cascades through the entire chain.

Here's how it actually works for a typical UK importer buying from a Chinese manufacturer:

Day 0: You authorise payment. Your supplier has shipped the goods and sent you an invoice. The goods are already on the water — or have already arrived at port. Payment is required before your supplier releases the bill of lading and commercial documents you need to clear customs.

Days 1-5: Your bank processes the payment. A standard SWIFT transfer from a UK bank to a Chinese beneficiary passes through one to three correspondent banks. Each intermediary adds processing time. The typical elapsed time is 3-5 business days. During this period, your money has left your account but has not yet reached your supplier.

Days 5-7: Your supplier verifies receipt and releases documents. Once the payment clears in your supplier's account, they verify the amount (after intermediary deductions, the received amount often doesn't match the sent amount — a separate problem created by the correspondent banking chain) and release the original bill of lading and commercial invoice. This takes 1-2 business days.

Days 7-8: You present documents to customs and your freight forwarder arranges collection. Customs clearance requires the original documentation. Your freight forwarder arranges haulage from the port terminal.

Day 8+: Collection. Your container is collected from the port terminal and delivered to your warehouse.

The entire chain from payment authorisation to goods in your warehouse takes 8-10 business days in a typical scenario. Two calendar weeks.

Where the money burns

The problem isn't just that the process is slow. It's that three separate costs accumulate during every day of delay — and none of them appear together on any single report.

Cost 1: Demurrage. Your container arrived at port while you were still waiting for your bank to process the payment. Standard free time at most UK ports is 5-7 days. If your payment-to-document chain takes 8 days and your container arrived on day 2, you've used 6 days of free time before you could physically collect it. By day 8, you're paying demurrage — typically £75-£150 per container per day at UK ports, escalating weekly.

Use our demurrage calculator to estimate your exposure on current shipments. For a complete explanation of how demurrage and detention charges work, see our demurrage and detention guide.

Cost 2: Detention. Once your container leaves the port, the shipping line's clock keeps ticking. You have 4-7 days of free time to unload the container and return it to the depot. If your warehouse is backed up because previous containers were delayed — a common cascading effect — you burn through detention free time too. Detention charges mirror demurrage rates: £75-£150 per day, escalating.

Cost 3: Dead working capital. Between the moment your bank debits your account and the moment your goods are on your warehouse shelf and available to sell, your capital is trapped. It's not in your bank account. It's not in saleable inventory. It's in limbo.

At an 8% cost of capital, £200,000 trapped for 10 business days costs you roughly £4,400 per cycle. If you run 10 procurement cycles per year, that's £44,000 in working capital cost alone — before a single demurrage or detention charge.

The arithmetic on a real import operation

Take a mid-market UK importer processing 100 containers per year from China and the UAE, with an average payment value of £50,000 per container.

Current state: bank SWIFT payments, 4-day average settlement

Demurrage: 40 containers exceed free time by an average of 3 days at £100/day = £12,000
Detention: 20 containers exceed free time by an average of 2 days at £100/day = £4,000
Working capital float: £50,000 × 4 days × 100 containers × 8% cost of capital ÷ 365 = £4,384
FX markup at 2.5% bank spread on £5M annual volume = £125,000
Total annual cost: £145,384

Optimised state: specialist FX provider, same-day or next-day settlement

Demurrage: 10 containers exceed free time by average 1 day at £100/day = £1,000
Detention: 5 containers exceed free time by average 1 day at £100/day = £500
Working capital float: £50,000 × 1 day × 100 containers × 8% ÷ 365 = £1,096
FX markup at 0.6% specialist spread on £5M = £30,000
Total annual cost: £32,596

Difference: £112,788 per year.

That's not an optimistic projection. It's the gap between a 4-day bank settlement with 2.5% spread and a 1-day specialist settlement with 0.6% spread. The FX saving alone is £95,000. But the demurrage, detention, and working capital savings add another £17,788 that most CFOs never attribute to their payment infrastructure.

Why your current reporting misses this

The reason dead capital doesn't appear on your P&L as a single number is that it's split across four different cost centres:

FX costs sit in finance — and are usually invisible because the bank embeds the margin in the rate. See how to find the actual number in our guide to auditing your bank's FX markup.

Demurrage charges sit in logistics — often buried in freight forwarder invoices as a line item alongside haulage, port handling, and customs fees.

Detention charges sit in logistics or warehousing — sometimes invoiced by the shipping line, sometimes by the depot, sometimes absorbed by the freight forwarder and passed through.

Working capital cost sits nowhere. It's an opportunity cost. It doesn't generate an invoice. No vendor sends you a bill for the return you didn't earn on capital trapped in transit. This is what makes it the most dangerous cost of all — it's entirely invisible unless you calculate it deliberately.

To see the full picture, you need to pull these four numbers together into a single metric: total cost per container from payment authorisation to goods available for sale. When our clients run this calculation for the first time, the number is almost always higher than they expected.

Three things you can do this week

One: Calculate your payment-to-warehouse time. Pick your last 10 container shipments. For each, note the date you authorised payment and the date goods arrived at your warehouse. Average it. That's your current cycle time. Every day you shave off reduces all three cost categories simultaneously.

Two: Separate your FX from your banking relationship. Your bank is not your FX provider. It's your lending, credit, and cash management partner. Routing international payments through a specialist provider doesn't affect your banking relationship — and it can cut your settlement time from 4-5 days to same-day or next-day. See how providers stack up in our compare FX platforms guide.

Three: Ask your freight forwarder for a demurrage report. Request a 12-month breakdown of every demurrage and detention charge across all your shipments. Most forwarders can produce this in a day. The total will surprise you — and it will give you a concrete number to work with.

The point of this exercise isn't to find someone to blame. It's to find money that currently disappears into the gap between payment and delivery — and redirect it to your bottom line.

The connection to settlement speed

Every article in this /forcfo/ series returns to the same theme: payment settlement speed is not an operational detail. It's a financial lever.

When we published the analysis of how T+2 settlement drains working capital, the focus was on the settlement float cost itself — capital trapped in settlement. This article extends that analysis to the downstream consequences: when settlement is slow, document release is delayed, and every day of delay generates real charges at port terminals and freight yards.

Faster settlement doesn't just free up working capital. It compresses the entire payment-to-warehouse chain, reducing demurrage exposure, cutting detention risk, and getting your goods onto shelves and into revenue faster.

For an importer, the question isn't whether your FX provider's rate is competitive. It's whether your total procurement cost — FX spread, settlement float, demurrage, detention — is as low as it can be. The rate is one variable. Settlement speed affects all four.

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